Former finance minister Ram Sharan Mahat defends changes made under him

KATHMANDU, Oct 18: Taking exception over changes made by the Ministry of Finance (MoF), Nepal Rastra Bank (NRB) Governor Chiranjibi Nepal has urged the parliament to endorse the first draft of amendments made to the Bank and Financial Institution Act (BAFIA) bill instead of its present form. 

The central bank governor requested the parliament to approve the amendment as NRB had originally drafted as it was in line with Basel III, a global regulatory framework for banks. 

Speaking at a meeting of the parliament’s Finance Committee on Tuesday, Nepal said the provisions proposed by the central bank in its original draft would strengthen corporate governance in bank and financial institutions (BFIs). 

However, former Minister for Finance Ram Sharan Mahat, who had tabled the amendment at the parliament, defended the MoF’s move.

According to officials of NRB, MoF removed, changed and added some clauses in the provisions. Among others, the ministry had added a provision to allow promoters of BFIs to offload their shares after a lock-up period of 10 years which has stirred a debate among banking experts and legislators. 

“The provision was added to allow investors to move their capital to other sectors. An investor may not want to stick to a certain business for that long a period. We should provide investors an exit from a business if they want to leave,” Mahat told the Finance Committee on Tuesday. 

While the central bank had proposed a term limit and length of tenure of BFIs’ chairmen and CEOs to prevent personal interest prevailing in BFIs, the former finance minister argued that such measure would not prevent anomalies in the sector.

“Placing restrictions on the tenure of the chairman alone cannot prevent malpractice at a bank as the chairman may find a dummy chairman to succeed him/her. We should strengthen the regulatory agency -- Nepal Rastra Bank -- to curb banking malpractices,” he said. 

The Finance Committee held meetings on the draft amendment to the BAFIA bill also included officials of MoF and the Ministry of Law, Justice, Constituent Assembly and Parliamentary Affairs. It has already held consultation with experts, former NRB governors and representatives of BFIs on the amendment bill which was sent back by the full house of the parliament in June asking them to revise some provisions in the amendment bill that had proved to be controversial. 

The house had instructed the committee to further discuss and review the provisions related to the definition of a BFI, promoter shareholders’ lock-up periods, allocation of shares to BFI employees, and qualification and tenure of the board directors and chairs of BFIs.

The Finance Committee’s decision to scrap a provision that proposed limiting BFI board directors’ and chairs’ tenure to a maximum two terms had prompted criticisms from banking experts who alleged that legislators and committee members who were also promoters of BFIs had a hand in these changes.

Prakash Jwala, the chairman of the Finance Committee, told Republica that the committee will now start discussions on the clauses that the full house has directed it to review.

“We have completed consultation with experts and the government. The committee will now discuss those clauses that the house has asked it to revisit. Based on the discussion, the amendment bill will be finalized,” he added.

 
• ministry of finance (mof)
 
• nepal rastra bank (nrb)
 
• governor chiranjibi nepal
 
• bank and financial institution act (bafia)